James Duddridge: Perceptions of Africa are changing – invest now

James Duddridge is the Member of Parliament for Rochford and Southend East. Follow James on Twitter.

Perceptions of Africa are
changing. It is no longer the case that regional conflict can be used to
paint the continent as a collection of failed states. Sky scrapers, city
dealers, the trading of stocks and shares and a growing affluent middle class
are slowly overtaking the traditional images associated with Africa.

I love Africa. Having
worked in Botswana, Cote d’Ivoire and Swaziland at various points in the 1990s
as a banker, it is a continent that has got under my skin. So it has been
fascinating for me to hear the excitement generated around Africa’s future.
I’ve recently went to a conference at the London Stock Exchange where investors
were buzzing with enthusiasm for African shares. Companies are seeing rapid
growth and everyone wants to get involved.

The narrative is quite
compelling. The World Bank’s development indicators show that in Sub-Saharan
Africa GDP per person has risen every year since 2000, averaging at 5.8% annual growth. That’s 12 years of continuous growth in the face of a series of world economic
shocks – we would love growth figures like that in the UK. In the first decade
of this century, out of the 10 fastest growing world economies, 5 were in sub-Saharan Africa, with Angola even outgrowing China.

There are a range of
reasons to explain this. Technological breakthroughs, for example the growth in
usage of mobile phones and mobile banking, sustained peace in many areas of the
continent, better governance, the emergence of local and regional stock
exchanges, growing internal and regional
trade, improved infrastructure and of course better regulation of natural
resource deposits.

What is encouraging is that
these developments will provide the solid platform that’s been needed to
sustain long term economic growth, which is good for Africa but also for Britain,
as it is in the British national interest for Africa to succeed.

The growth of Africa’s
middle class is one of the most significant aspects of African growth because
of the potential it creates as both a market for British goods and services, but
also in the continued development of a population that is educated and
politically informed. A recent report by the African Development Bank estimates
that around 30% of the continent’s population are now middle class and
this will continue to rise.

Recent trade statistics
show that for the first time trade with non-EU countries has accounted for the
largest proportion of the UK’s exports. With little sign of an
improving economic outlook in the EU anytime soon, now is the time for British
business to look to Africa.

Although much further
along the track in terms of economic development, the example of China is an
interesting one. One of the key drivers of growth in British non-EU exports is the
emergence of the new Chinese middle class and their disposable incomes.
Alongside this we have seen the growth of dozens of clustered, well-connected
new cities in China, which are connected by new air and railway hubs.

I am in no doubt that this will be replicated in Africa in the coming
decades. Some of the biggest cities in Africa are growing at an extraordinary
rate as is the middle class who increasingly populate them. There is a real opportunity here for British business to be at the
forefront of doing business in these developing African markets.

So what is the does
this mean for the British Government’s policy commitment to investing 0.7
percent of GDP in developing countries?

I recently attended
an event where the International Development
Secretary gave a speech on how the Department for International Development, under her leadership, is putting a greater focus on economic development and investing
in growth.

Britain has a
unique opportunity to help support the creation of robust private sector led
economies in Africa. Although there still remains the need for immediate aid to
assist in the most desperate situations, the refocus on using the British aid
budget more intelligently and strategically will create the right conditions
for growth in the countries that both need it and have the potential to be long-term trading partners.

This should be
welcomed by all Conservatives. It is right and it is smart. We are in a
globalised market place, and we need to ensure that those countries who we do
business with are dynamic trading economies that empower businesses rather than
hinder them. Africa is a market that is growing, and British investment can help
create the right environment that can secure our own long term economic
interests.

Indeed ,on the same
day that the Secretary of State spoke at the London Stock Exchange 28 top CEOs
wrote a joint letter to the Financial Times. Their words are telling: “This
isn’t about corporate social responsibility; we know that developing countries
will be major markets and important sources of supply in the
future...Developing countries become emerging economies and emerging economies
become the engines of future global growth and prosperity”.

And sustained
economic growth is what will reduce poverty in Africa. The best remedy for
those in poverty aren’t handouts, but sustainable jobs that will give parents
the opportunity to plan and save for their children to have a proper education,
which will in turn lead to more schools and a better education system that will
produce well educated young people who can go on to work in growing local and
regional businesses.

There are already
some excellent examples of work that the Department for International
Development (DfID) are doing. For example, DfID match-funded Vodafone's initial
investment in the M-PESA mobile banking phone service, which now has 17 million
users in Kenya, and a third of Kenyan GDP is expected to pass through the M-PESA
system.[1] In South Sudan, DfID
have partnered with SAB Miller so that 1200 farmers can get involved in
supplying SAB Miller’s brewery in Juba.[2]

I recently asked the
department what support they were giving to assist the growth of regional
African Stock Exchanges, which is an important driver for regional economic
growth.

In Tanzania, DfID
and other donors support the stock exchange regulator to develop a new market
segment at the Dar es Salaam Stock Exchange called the Enterprise Growth
Market, which is similar to the Alternative Investment Market at the London
Stock Exchange.

And in Southern
Africa, DfID has provided support to the Committee of Southern African
Development Community Stock Exchanges to develop business plans to improve the
integration of capital markets in the region.[3]

These are just some
of the practical ways Britain can use its aid budget wisely and effectively and
I would like to see the Government go further in helping create the conditions
that will sustain growth and attract investors. DfID increasingly
use the phrase that Britain’s investment in development isn’t just the right thing
to do but the smart thing to do. I couldn’t agree more.

[1]
Justine Greening Speech to the London Stock Exchange, 11 March 2013

[2]
Justine Greening Speech to the London Stock Exchange, 11 March 2013